Title XII authorizes the Secretary of the United States Department of the Treasury to create multi-year grant programs designed to encourage Title XII’s targeted group, low-to-moderate income individuals, to utilize mainstream financial products and services. Title XII also authorizes participating institutions to issue small-dollar loans to targeted individuals and provide them with the financial counseling necessary to conduct transactions and manage their accounts. In effect, Title XII attempts to minimize the exposure of low-to-moderate income individuals to predatory lenders by diminishing their need to use non-traditional financial products and services, such as pay-day loans and cash advances

PURPOSE:

Title XII was enacted to provide millions of low-to-moderate income individuals living in the United States the opportunity to access and utilize appropriate mainstream financial products and services. See 12 U.S.C. § 5621.

Provisions:

Title XII authorizes the Secretary of the United States Department of the Treasury to create multi-year grant programs designed to encourage Title XII’s targeted group, low-to-moderate income individuals, to establish accounts at federally insured banks. See 12 U.S.C. § 5623(a). The grants are also designed to improve the targeted group’s access to such accounts on reasonable terms. See id

Title XII also authorizes participating institutions to issue small-dollar loans to targeted individuals and provide recipients with the financial counseling and education necessary to conduct transactions and manage their accounts.See 12 U.S.C. § 5623(b). These loans provide low-cost alternatives to non-traditional forms of financing that often impose excessive interest rates and fees. See id. The small-dollar loans can only be made pursuant to terms, conditions and practices that are reasonable for the individual consumer purchasing the loan. See id.

IMPLEMENTATION:

According to Title XII’s legislative history, Congress estimated that 25% of the families living in the United States were either “unbanked or under-banked” prior to Dodd-Frank’s enactment (CCH Attorney-Editor 563). Individuals that did not use mainstream financial products and services often relied on non-traditional forms of financing, such as pay-day loans and cash advances. These non-traditional products and services often carry high interest rates and fees, and leave consumers unable to save for life’s necessities, such as medical or educational expenses. Seeid. Thus, Title XII creates programs that allow targeted individuals to sever their reliance on predatory financial products and services by providing them with small-dollar loans on reasonable terms.